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Hey, everyone. All right. I’m going to give folks a second to get tuned in here. So this is a live broadcast and what I’m going to talk about in this video is why we hold losers too long.

This is something that a lot of traders struggle with. It’s something that I struggled with myself when I got started. I did a poll earlier today when I was trading during the morning show I asked people what do they feel is their biggest struggle, and holding losers too long was a big one.

So I thought I would come on and comment a little bit on that.

So two things.

So as you guys are getting tuned in, hopefully you hit the thumbs up. Hopefully you’re subscribed to the channel. If not hit the thumbs up, subscribe to the channel. That way when I do pop on and go live like this, you’ll actually get the alert if you’re subscribed that I’m on. So I see people tuning in right now and saying hello, so thank you guys. Hi. Hi. How are you? Yep, cut your losers short.

Easier said than done. I’m going to show you some metrics from my trading during this broadcast. This was 378 trades and during this period, I lost $167,000, which is not an insignificant amount of money to lose.

And this is important because this speaks to the topic today, holding losers too long. What you can see is that my average winners during this period of time, four minutes long. My average losers in contrast seven minutes long. So I was holding the losers longer. And ultimately, you could see that right there. Ultimately, what that was doing was it taking a bad trade, a trade that already wasn’t that great and just letting it go further against me. And as a result, my average losing trades were $3,200 while my average winners were only 1800 bucks. So we would call this a negative profit/loss ratio.

Now, since I’m going to talk about some of my metrics, I do want to keep it in context. I think that that’s important. So for instance where I sit right now since January 1st, 2017, I’m sitting right now at a net profit of about $8.39 million. So if you’re wondering whether or not I’m qualified to talk about day trading or to talk about metrics, I think that I am. This is a total here and I’ll switch the view in a second, but this is, let’s see, a total of 16,000 trades.

All right, so the topic today is why do we hold our losers too long and what can we do to change it? I’m going to run the intro and then we’re going to jump right in.

Okay, so you can see the full screen now of my metrics from this period of time and this is now from 2017. But if I go back to January 1st, 2021 to January 15th, which was the first two weeks of the year that was when I had this negative profit/loss ratio and took some of these really big losses.

So one of the things that I had learned both through my own experience and from working with students who are trading the markets from all around the world is that it is very, very common to have a negative profit/loss ratio. It is very, very common to hold losers longer than you hold winners and just generally to hold losers too long. And it all stems down to fear.

And so to elaborate on that, what’s happening when your trade, every single trade you take you know inherently it has the potential to be a winner or a loser. But when you take a trade, all of a sudden it goes against you and it goes against you quickly and you’re down let’s say in this case $2,500, and you know that your average winner’s only 1,800. So you know you’re already down more than you would typically make on a winner.

All of a sudden, there’s this shift in mindset from just cut the loss breakout or bailout to hold and hope, the hold and hope. The hope is, of course, that it turns around because until you press that sell button, there’s always the chance that it could turn around.

Once you press the sell button, the worst thing is you press the sell button and then it bounces right back up a moment later, and you would not have taken the loss if you had just held it longer. And there are times when that happens and unfortunately that is the market giving you a positive reinforcement of a bad behavior. You get rewarded for really doing something you shouldn’t do, which is hold and hope or even worse, average down on a trade.

And then how that rolls into to the negative profit/loss ratio, because you’re holding your winners too long what is typically the case for most traders like myself, and I can pull up an example of a chart from today if maybe that’s helpful. But what’s very typical for me is I’ll buy a stock at let’s say whatever $6. And my target is to sell half at 6.15, another half at 6.25. And the rest may be up to 6.30, 6.40.

So my average profit on it’s probably only, only about maybe 20 cents a share. All right, so 20 cent average winner, but if I get in it at $6 and it drops immediately to 5.80, I don’t stop out. I don’t stop out because I think, “Well, it could come back up. It’s at 5.80. As long as it holds 5.75, it should be okay.”

It’ll curl back off 5.75, back through 5.85, 5.95. It’ll be back through six before you know it. It’s okay. I’ll hold it. Or if it drops down to 5.60, I’ll think, “Well, I’ll at least see if it holds the half dollar because the half dollar is 5.50 is typically psychological support.” So I’ll give it to 5.50 and then it hits 5.50 and say, “Well, but the VWAP is 5.45. So I’ll give it another couple cents. If it holds the VWAP and gets right back above the half dollar, then I’ll be fine.” And then I cut the loss at 5.35 as it breaks the VWAP and just like that I’ve lost 65 cents a share.

I got in at $6 and I’m stopping out at 5.35. Whereas if I had had a winner on it, I would’ve only made maybe 20 cents, maybe 25 cents a share. And so it creates this negative profit/loss ratio where your average losers are bigger than your average winners. And from a mathematical standpoint, it is very hard to be profitable when your losers are bigger than you winners.

And so one of the things that, of course, I do for our Warrior Pro students in our classes we break down risk management and we talk about the metrics of a successful trader. If you can understand the metrics of a successful trader then you know what you’re striving for, you know what to look for.

And so when we talk about risk management, one of the things that we talk about are profit/loss ratios. We talk about it pretty extensively because if you don’t understand a profit/loss ratio, you don’t understand how to put statistics in your favor to make it a little bit easier to be successful. And so, in other words, if you’re trading where your average winners and your average losers are exactly the same 1:1, you need to be right 50% of the time to breakeven. And that of course is before commissions. All right, that makes sense. That’s straightforward enough.

Okay. Well, how about when you risk one? Let’s see when you and your winners are only $1, but your losers are $2 or 2:1. So your winners are 100, your losers are 200, which was exactly the case right here. My winners were 1,800. My losers were 3,200. So I basically had inverted profit/loss ratios. It was negative. Okay, so in that scenario, let me pull this back up, I’ll pull this back up. I would’ve needed to have been right 67% of the time just to breakeven. Of course, we know I lost. My accuracy during that time was 54%.

The fact is 67% accuracy. So let’s look at 2021 as a whole. I’ve been averaging 68%. Well, this is 2020 and 2021. Actually, this is January 2020 through January 2021. But in any case, so 4.4 million in net profit, 68% accuracy. So if you’re trading on a negative profit/loss ratio, you really are setting the bar very high for yourself. And that’s not what you want to do. You want to set the bar low. You want to make it easier to be successful. So what you would then strive for would be to risk 100 to make 200. Right now that may not be something you always achieve. But when I’m looking at a trade, I ask myself, “Do I have the potential to double in profit what I’m risking?”

And if I don’t even have that potential, I don’t even want to take the trade. So I at least need that potential. It doesn’t necessarily mean it’s going to happen, but I need that potential. So this was a stock that I traded today. So let’s see. So on this one, for instance, my entry on this was right down here. I’m sorry. My entry was right here. So this was an entry off this yellow ascending support trendline. And it’s a little bit of a complicated setup, but it’s a momentum setup. So my entry was down here at about 10.65. What was my stop? 10.50. It was at the half dollar. So I set my stop at 10.50, which meant I was risking 15 cents.

You know what my target was? 11 bucks. And back of mind was a break of 11.10. And this popped up to 11.03 and I got my 2:1 profit/loss ratio on that, the risk versus the reward. This was a good trade. We had another one, GWH today. This one earlier this morning. Some pretty big momentum on it as you’ll see. So on this one, first one-minute candle to make a new high right here. All right. So that was 16.75. So for instance, on stock like this with an entry at 16.75, stop would’ve been 16.50. Again, the half dollar. And because the high of day was 17.19, that was the target, a retest of the high of day, which is nearly 2:1 profit/loss ratio, almost 50 cents. But it ended up going all the way to 18.

So when you trade the right type of stocks, you’re more likely to have stocks that exceed your profit/loss ratios in terms of your base target. But this is something that’s really important to be aware of. And I wanted to make this kind of a short video because what I have for you guys, I want to give you a link where you can watch a two-hour session that I hosted with my trading coach and with four other profitable traders. So it was five of us and my trading coach. We were all sitting on a call. We were talking about this very issue. So this is a two-hour long. It’s like a trader psychology session. And these are things that we do on a pretty regular basis for our Warrior Pro students. So I’m going to give you the link where you can check it out. Let’s see. I’m going to paste it right here.

And I’m going to put the link … I’m going to put it on the screen so you can just take a look at it. So I want to give you guys a chance to download and stream this episode. So this is straight from the Warrior Pro class. It’s a video. So the way we’ve set up the class is for those that aren’t familiar, we’ve got our Warrior Starter course and then we’ve got the Pro class and in the Starter course, now I’ve actually got the curriculum right here. So in the Starter course, the Starter course is 15 chapters long and chapter 14 is trader psychology. So in chapter 14, that’s when we bring in Ted. Ted has been my trading coach for a very long time since I began trading. And that’s where he comes in and he talks about the fact that success in trading is probably 50% skill and 50% mental, it’s up here.

I mean, it really is so important to get into the right head space, the right mindset. So recognizing and understanding emotions and trading, the stages of learning to trade, the strategies to support your best trading, meditation, mindfulness practice. And then in the Pro class we come back to these topics. We have chapter 17 where I have interviews with profitable traders. So these are students who have their profitability badge. We’ve got three, I think, three interviews here with students who have a million dollar badge have verified a million dollars of profitability. We have one that says 750,000. A couple at around 500,000. And that was when we decided to have this session with Ted.

So I think you guys will get a lot out of it. I think you’ll enjoy it a lot. I can sit here and talk about trader psychology and the sort of mentality of holding losers too long and selling winners too soon really until I’m blue in the face. And I don’t mind talking about it for a few more minutes or asking some questions from those that are tuned in. But I really encourage you guys to stream that episode that I’ve recorded with Ted and then four other students on holding losers too long. I think it’s really going to be a big eye opener for you.

Because the fact is we know that most traders lose money. And I already said this. You know my results are not typical. Most traders lose money and we have to figure out why. And one of the things that is very common is holding losers too long. So there was a question about whether I ever got into the habit of holding losers too long, like holding stock for multiple days and things like that. So for me and everyone’s different when they start trading. But for me when I got started, I didn’t have a lot of money in my account and I was often trading on leverage.

So when I was using leverage, I couldn’t afford to hold on leverage overnight and many of you guys know that. You can trade on leverage for day trading, but you can only hold on very small amounts of leverage overnight. And I just never felt comfortable holding on leverage overnight. So for me it forced me essentially to close my positions at the end of each day. Occasionally, I would get into a trade that I would hold for a couple days. It was very rare. It was not common and it was not successful for me, which is why I really stopped doing it.

But some traders who have larger accounts will fall into this habit of getting into a trade and it starts to go down and say, “Ah, well, I’ll just hold it and see if it comes back up.” And again, that’s that fear. It’s not wanting to lock up a loss and move on to the next trade. It’s holding and hoping. So when you start holding and hoping, you start doing that on one position, then two and three and four. The next thing you know, I mean, just for example, this CCXI. I’m sure there’s some people out there who might have been holding and hoping. Look at this drop. From $48 all the way down to $9 a share.

And I’m just saying like, for instance, let’s say you took a trade on it, I don’t know, around here and it didn’t bounce and you thought, “Oh, I’ll just kind of turn this day trade into a swing trade.” Well, next thing you know you’re putting yourself at an enormous amount of risk because the longer you hold it, the more you expose yourself to the potential that bad news comes out. And that’s exactly what happened on this one. Now biotech, pharmaceutical companies, especially ones that are doing clinical trials. These ones are especially risky to be holding overnight, but it doesn’t mean that some traders don’t do it. It’s holding and hoping. It can be very, very powerful. And the next thing you know, you’ve thrown all discipline and common sense out the window and you’re averaging down, you’re holding overnight and potentially you’re putting your whole account at risk.

So I think that’s something that you wouldn’t think it’s possible to have one trade blow up your account or end your career. And yet, it one trade mismanaged where you average down and you hold and hope, where the loss gets bigger and bigger and bigger. I mean, that can be the one trade that that ends it and it’s not worth it. It’s not worth it to let that happen. So you never want to power one trade with the ability to blow up your account or end your career. And ultimately that means getting really good at cutting your losses.

So in that session, of course, which I hope you guys stream. You’ll hear five different points of view on cutting losses quickly. It’s something we all have to learn how to get good at. One of the things that I’ve said over the years is that being a successful trader isn’t about making more money. It’s about losing less money. So I bet every single one of you in here who are streaming and thank you guys again who have tuned in, who hit the thumbs up button. I really appreciate that.

Every single one of you here, you think about the path to profitability and you might think, “Oh, the path to profitability is I just need to make more money. I need to have more winners.” What if, I’m just thinking out loud, what if you were able to reduce your losses? What if you were able to reduce your average losers by 10%, 15%? Now, if you don’t know what your average losers are, then that by itself is I suppose a problem because you don’t know what you’re benchmarking yourself against. But right now with my average losers at around $1,600 or based on that period of time, it was around 1,600. If I could reduce those by 10%, that would be a step in the right direction. If I could reduce them by 20% or 30%, that would be huge.

And that would absolutely translate making more money at the end of the day. And it wouldn’t be because I was focusing on winners. It would be because I’m focusing on cutting my losses quickly. Cut the losers. So you have to be so brutal, just totally ruthless, no attachment. These are stocks and it doesn’t matter how big the company is. It doesn’t matter if you’re talking about Facebook. Facebook right here, I mean, this is a significant drop from the high of 3.78 down to 3.17. It’s a 20% pullback. So, I mean, at a certain point, you got to say, “All right, I don’t want to keep holding this.” Now, it depends what your cost basis is and everything else, but it doesn’t matter how big the company is or how small it is. You do not want to hold and hold. That’s not trading.

Trading is getting in, getting your profit and getting out. So today’s a day where I did make some money. I got myself up about $20,000, which was good. I mean, not a phenomenal day, but a decent green day. And I’m fine with that. And most likely I left a fair amount of money on the table. I left money on the table because I stopped trading at 10:00 AM. I know that because this stock after 10:00 AM ended up going higher, that had I kept trading it maybe I would’ve been able to make more.

But on the other hand, if you’ve hit your daily goal, if you’ve made some money, well, when is enough enough? Take the money off the table because every time you keep trading, you’re exposing yourself to the risk of getting caught in a flush to having one of those days where you go from up 10, 20 grand and you give back half. And it can happen. It can happen to the best of us. This is a false breakout right up here. And it’s a pretty dramatic one. So right there, false breakout. It went up to a high of 29 and then drops all the way down to 26. That’s a three-point drop and then it flushes here down to 24.

If you got caught in that and then you were holding and hoping, it’s back to 22, it hasn’t even gotten back to the high from that entry there. Now at that moment that entry might have made sense. It was a bull flag. It was relatively strong, but if it doesn’t work, you just got to let it go. You got to be just ruthless. Cut it short. That’s it. I’m done. I’m out. So trading is definitely a career of discipline. It’s not easy. Discipline is not something that you’ll just learn and you’ve got it forever. It’s something that you constantly have to focus on. It’s a muscle and you’ve got to keep exercising it and keep trying to keep it sharp and strength and strength.

I mean, you just can’t let your guard down. If you let your guard down and that’s when you get complacent, that’s when you get sloppy and that’s when you start taking losses. And I say all of that having done all of that, I’ve been there. I’ve had red months. I’ve had huge red days. I mean, I’ve gone through it. And I thank you guys who are tuning in. We’ve got some Warrior Pro students who are tuning in and I appreciate the comments you guys are making about the classes. Our goal is to provide you with a holistic education. I want to give you some financial literacy.

So you better understand the equities markets. We obviously are focusing on day trading specifically. The Warrior Pro class is our flagship course. It includes the Starter and then goes into my day trading course and it’s extensive. This is an extensive course. There’s a ton of content here. And this is for people that really want to learn the ins and outs of my strategy. And you will learn the ins and outs of my strategy. This is not a course or a community where it’s just videos of me bragging, or it’s just one little PDF, seven-page PDF handout. This is a lot of content and this has taken years to compile, produce and create.

So we launched the Warrior, this first version of the day trade course was released in 2014 I believe it was, maybe 2015. This book I taught or I wrote in 2015, this book is how to day trade. So for those that would like to get a copy of this book if you register to my workshop, you’ll be able to get that. I can give you the link here to this page. If you click right here to register for a free class, you can get a copy of the book. And so you guys are welcome to do that anytime. Free copy of how to day trade when you register.

Now, for some folks, you’ll think, “Oh, Ross, I don’t need to register for another webinar. I’ve seen a million of them. I already know how you teach. I understand. I just want to jump in.” And we’d love to have you jump in and you can become a student today. We’d love to have you join us. So you can check out the strategy page and you’ll be able to see the curriculum for the Starter, for the Pro. And these classes are streaming so you can watch them anytime. And then during the week we have the chat room, of course, open Monday through Friday where I’m live trading in the mornings. And then we have mentor sessions every day right now so you can come in and ask questions and things like that.

But in the meantime, I encourage you … Oh, and this is actually right here. This is the episode holding losers and averaging down, a special two-hour session with Mike and some of the other mentors. So we have Mike, we have Roberto, Danny, myself, Celena. I thought Jess was on that call, but maybe not. Any in any case, so that’s what you guys are going to get today just as a sneak preview. And you can stream that right now. And if you like that and you enjoy this little video and what I’ve talked about today, and you’ve checked out some of my other episodes videos here on YouTube and if you want to take leap and become a student, we’d love to have you.

And at the very least, I hope if you enjoyed the video, you hit the thumbs up. So why don’t I do five minutes of Q&A, answer some questions that folks have. Thank you, Scotty. Avail says, “I trade every dollar. Like it’s a million dollars. It really helps.” That’s interesting. One of the things that I’ve said is that if I don’t feel confident taking full size, then I don’t want to take the trade at all. In other words, sometimes people say, “Oh, well, why don’t you just take a start or why don’t you just take a small position?” And if I don’t feel comfortable taking full size, and there’s something about the stock that doesn’t meet my criteria, there’s something about it that just doesn’t isn’t good enough. Maybe it’s the spread. Maybe it’s the volume, whatever it is. And that by itself is a reason not to take the trade at all.

So if I focus just on quality trades, just on stocks where I can take full size, it will do better. So I don’t focus, Susan, on percentage gains. Some traders may do that. I don’t. I focus on the dollars per share. So I look at the average winners. It’s a different way of looking at it and it’s not that one’s right or one’s wrong. Usually, you would choose one or the other. When you trade lower price stocks, this can be tricky because you could have a lower price stock and I see some traders mentioning Koss, KOSS. So this stock has gone from 15.80 to 18.88 here in like three candles. So I mean, this could be a very big percentage move.

GWH was up at one point like 150% today. So those are big percentage moves, but then there might be other days where you’re ending up trading something like GameStop. And so the same percentage that you might get on one wouldn’t likely realist translate to the other. So I focus just on average gainer, average loser in dollar amount. So Yag says, “For someone who only has a little money for trading and can only trade once a day, what’s the ideal cut loss?” So this is a tricky one because if you have a small account, let’s say you’ve got like $2,500 and you’re trading with TD Ameritrade so you can only take one trade a day. That can be a challenge because you feel like, “Well, I don’t want to get in and then two seconds later sell it for a loss only to watch it bounce back up. That was my one trade of the day. I can only get one trade of the day.”

So my opinion on that is, I mean, it’s really the same. If you focus on the best quality setups. Yes, there will be times where you get in and you do stop out right away and that’s it, that’s your one trade of the day and it might go back up. But if you’re focusing on really good quality setups and you know those because you’ve studied the strategies that I teach or you’ve developed your strategy, whatever it is. Then you’re going to be better off. You’re going to be better off. Your accuracy will be higher focusing on better quality setups.

And when it comes to success, there’s a lot of things that factor into a trader being successful. And one of the big ones, which is why this is so relevant here is emotion. And that’s why I had Ted do that trader psychology session with us. There’s a huge component that’s mental. And so something that I’ve noticed among our students who have become successful and we don’t track the success of all of our students at whole, at large. We don’t have access to their broker statements because we’re not a broker.

So some students voluntarily share with us how they’re doing and that’s fine, but we don’t know as a whole how students are doing. There’s no way we could really know with certainty. But one of the things that I have found among the students who have been successful is that it’s typically those and this is very frustrating. It’s typically those who don’t need money who make the most money. Now, what the heck is that about? They don’t even need the money and then it just falls into their lap. And what they that tells me is it’s about the mentality.

People that are trading that don’t need the money, don’t put this pressure on themselves that they have to make X amount by a certain date to pay a mortgage payment or to pay a student loan, or whatever the case is. They’re able focus on just the skill and the hobby and the enjoyment of learning about the markets. They can take it very slowly or some of them are comfortable taking more risk, and they can take that risk. And they don’t have this whole second layer of evaluation when they’re taking every single trade, which is how will this help me pay my bill this week? Am I going to be able to keep my account above $500? Am I going to be able to keep it above 20,000 or whatever the account is? That stress creates a really huge amount of pressure.

And while it’s true that some people under pressure succeed, I think what’s more common, especially in trading is that with that pressure you start trading from a place that’s more and more emotionally fueled. So all of a sudden, every trade starts to have the ability to make or break your week or your month. And every trade is either validating that you’re going to be okay, you’re going to survive, you’re going to make it, or is calling into question whether you’ll survive, whether you’ll make it. And when you’re back is up against the ropes like that, it’s very hard to think clearly. Anytime you have a loser, you start to immediately think, “Wait, does this mean I’m not going to be able to survive? Does this mean I’m not going to be able to pay my bill at the end of the month?”

And then that invariably is factoring into your decision of, “Do I cut the loss or do I hold it and hope it turns around?” So I think that the success rate of traders and we know it’s poor is probably in some way correlated to wealth distribution in general. The people that are more wealthy will tend to be more successful and people who have less money will tend to be less successful. And that’s based on just an opinion. It’s based on a fairly small set of data. And it doesn’t mean that there aren’t people that totally buck the trend who are very wealthy and then lose money or who are very poor and who do very, very well.

So for me when I got started, trading initially was about supplementing income. And living in Vermont at that time, I really didn’t need to make a lot to be successful in what I determined to be successful. So for me, 100 dollars a day, $200 a day, that was fantastic. That would’ve been like me doing really well. There’s other people out there that 100, 200 a day isn’t even going to make a dent. They need to be making 1000 a day or something like that. And so then, of course, the bar is set higher. So for me with the bar set lower, having a year where I made 30,000, I was happy with that. A whole year making 30,000, I was happy with that. I thought that that was good progress.

Now, when I ended up having years where I made six figures, I thought that was great too, but my bar was set lower. I did get myself into a position where I was up against the ropes. I did not have other sources of income. I was spending money on credit cards for cost of living. And I was just barely paying my credit card payments. And I knew that I couldn’t draw money out of my trading account to pay bills. So at that time I was paying bills from my trading profits like right from the account. So I might write a check for a bill and I knew that by the time that check cleared, my account would be back below 25,000. So I had like three days until they received the check in the mail to get my account up another $1,500.

And that created a lot of stress and a lot of pressure. When I had a lot of stress and a lot of pressure, that’s when it was most important for me to focus on the basics, focus on the setups that I was the most confident in and trading less, not more. And then once I began to develop some confidence from trading less but generating profits, that’s when I was able to start adding in more strategies and start trading more actively. And it didn’t mean that I didn’t hit bumps in the road after that because of course I did, but that was a big turning point for me.

So anyways, I just wanted to share that with you. I hope this has been helpful. I really encourage you guys to go ahead and watch the two-hour special. The link. You’ll be able to watch it later. You don’t have to watch it right now. You can save it and watch it tonight or tomorrow. Whatever’s good for you, that’s fine. I think you’re going to get a lot out of it. I hope you really enjoy it. And I hope that some of you guys come over and join us at Warrior Trading in the chat room.

I love being on YouTube, but as always in the chat room, YouTube has a broadcast delay. Of course, you guys probably know that. In our chat room, we’ve got basically no delay and we have all the classes so we’ll love to have you guys come over and check it out. I hope you do. And I thank you for tuning in here today for this special live broadcast. So as I end it, I’ll ask again, I hope you’ve hit the thumbs up. I hope you’re subscribed to the channel. Next time I jump on and go live, you’ll get a notification if you’re subscribed to the channel.

And I’m going to put up my disclaimer again as a reminder that trading is risky. My results are not typical. All right? So given that most traders lose money, you should assume you’ll lose money. And only trade with money you could afford to lose. And when you start trading, you should trade in a simulator. Don’t put real money on the line until you’ve first proven profitability. Take it slow. All right, and with that, I will see you guys tomorrow morning. Okay, I’ll see you then.

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